Gasoline pump prices are falling to their lowest levels in years — which is good news for consumers.
But independent gas station owners, who are facing dramatically slowing sales, are struggling, according to Libby Bierman, an analyst for North Carolina-based Sageworks.
As they wrestle with fuel prices that offer only pennies on the dollar in profit, station owners are trying to boost the bottom line with specialty products in attached convenience stores and at the pump — and by offering service.
“It has always been nip and tuck for these guys,” said Mark Larson, executive director of the Colorado Wyoming Petroleum Marketers and Convenience Store Association. “The independent guy really does have a tough nut to crack. It is tough.”
While net profit margins have averaged about 7 percent among privately held U.S. companies in the past 12 months, profits are closer to 1.7 percent for independent gas stations, Bierman said.
“Gas stations are drastically underperforming the private company averages on these metrics,” she said.
More telling, said Bierman, is that sales increased only 0.9 percent for the period, compared with a 14.4 percent increase from October 2011 to October 2012.
Major oil companies own about 3 percent of the 157,000 locations selling gasoline in the U.S., Larson said. The vast majority of service stations, truck stops, convenience stores and marinas are operated by independent owners.
“A lot of people still believe (that) because we have a Conoco out there or a Sinclair, that it is owned by ‘big oil.’ It is not,” Larson said. “(Big oil companies have) divested themselves of all their convenience store holdings. It is a trend that is going to continue.”
While independent stores make pennies on a gallon, the “upstream folks” make dollars on the gallon, he said
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Larson attributes much of the slowdown in gasoline sales to better-built cars and fuel-efficiency standards. It is a plus for the driving consumer, but it decreases the amount of gas that independents sell and the repair work that they do.
About 70 percent of gross sales at the gas stations comes from fuel, while the rest comes from “indoor sales,” whether it’s goods sold at the convenience store or repair work done in the station’s garage, he said.
To counterbalance the slowing fuel sales, the independent owners must branch out to draw in customers — whether by selling foods, snacks and beverages or by filling service niches, Larson and Bierman said.
Larson said that a big push now is on fresh and healthy foods.
“We are seeing more and more of our (members) looking at what they can offer consumers along health lines and keeping it in a convenience framework,” he said.
He said stores that have not kept up with the conveniences and technologies at the pump are the ones that “will probably do a little more bleeding than the others.”
Paul Funk, a mechanic who has worked 20 years at Brad’s Conoco, 1075 S. Union Boulevard in Lakewood, said the station survives by filling one of the service niches: repair work. The station has three mechanics.
Funk said Brad’s Conoco also fills another niche: selling non-ethanol fuel in the winter, which attracts motorists from throughout the Denver area.
He said the fact that cars are much better built than they were even 10 years ago has cut into business.
“What really keeps us in business is the fact that once the cars are out of warranty, we take care of that customer,” Funk said. “We want to see that customer get 200,000 to 300,000 miles out of the car.”
But he still loves his job, adding that the main focus of the station and its mechanics is focusing on new automobile technology.
“We want to be able to take care of the customers when their 2012 car runs out of warranty. We want to be able to work on that car and service that car,” he said.
“The technology that the new cars are coming out with I actually enjoy learning about.”
Howard Pankratz: 303-954-1939, hpankratz@denverpost.com or
